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Imperfect competition, indirect tax harmonization and public goods

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  • Christos Kotsogiannis

    ()

  • Miguel-Angel Lopez-Garcia

    ()

Abstract

This paper shows that the welfare implications of indirect tax harmonization in a two-country imperfectly competitive framework, are, in general, indeterminate in the presence of public goods: Both countries can be made either worse off or better off. This holds under both the destination and origin principles of taxation and is in sharp contrast to existing results where revenue effects are not present. A consequence of this indeterminacy is that a precise evaluation of tax-harmonizing policies under both tax regimes requires an explicit consideration of the underlying preferences for private and public goods as well as the oligopolistic sectors’ relative cost structures. Copyright Springer Science + Business Media, LLC 2007

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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 14 (2007)
Issue (Month): 2 (April)
Pages: 135-149

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Handle: RePEc:kap:itaxpf:v:14:y:2007:i:2:p:135-149

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: Origin principle; Destination principle; Indirect tax harmonization; Reform of commodity taxes; Public goods;

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References

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  1. Haufler, A. & Schjelderup, G. & Stahler, F., 2000. "Commodity Taxation and International Trade in Imperfect Markets," Papers 17/00, Norwegian School of Economics and Business Administration-.
  2. Nigar Hashimzade & Hassan Khodavaisi & Gareth Myles, 2005. "Tax Principles, Product Differentiation and the Nature of Competition," International Tax and Public Finance, Springer, vol. 12(6), pages 695-712, November.
  3. Keen, Michael, 1987. "Welfare effects of commodity tax harmonisation," Journal of Public Economics, Elsevier, vol. 33(1), pages 107-114, June.
  4. Michael Keen & Sajal Lahiri & Pascalis Raimondos-Møller, 2001. "Tax Principles and Tax Harmonization under Imperfect Competition: A Cautionary Example," CESifo Working Paper Series 518, CESifo Group Munich.
  5. Andreas Haufler & Michael Pflüger, 2001. "International Commodity Taxation Under Monopolistic Competition," CESifo Working Paper Series 529, CESifo Group Munich.
  6. Keen, Michael, 1989. "Pareto-improving indirect tax harmonisation," European Economic Review, Elsevier, vol. 33(1), pages 1-12, January.
  7. Miguel-Angel Lopez-Garcia, 1996. "The origin principle and the welfare gains from indirect tax harmonization," International Tax and Public Finance, Springer, vol. 3(1), pages 83-93, January.
  8. Lahiri, Sajal & Raimondos-Moller, Pascalis, 1998. "Public good provision and the welfare effects of indirect tax harmonisation," Journal of Public Economics, Elsevier, vol. 67(2), pages 253-267, February.
  9. Kotsogiannis, Christos & Lopez-Garcia, Miguel-Angel & Myles, Gareth D., 2005. "The origin principle, tax harmonization and public goods," Economics Letters, Elsevier, vol. 87(2), pages 211-219, May.
  10. Haufler, Andreas & Pflüger, Michael, 2004. "International commodity taxation under monopolistic competition," Munich Reprints in Economics 20425, University of Munich, Department of Economics.
  11. Michael Keen and Sajal Lahiri, . "The Comparison Between Destination and Origin Principles Under Imperfect Competition," Economics Discussion Papers 424, University of Essex, Department of Economics.
  12. Keen, Michael & Lahiri, Sajal, 1993. "Domestic tax reform and international oligopoly," Journal of Public Economics, Elsevier, vol. 51(1), pages 55-74, May.
  13. Lopez-Garcia, Miguel-Angel, 1998. "On welfare and revenue effects of indirect tax harmonization," Economics Letters, Elsevier, vol. 60(2), pages 185-193, August.
  14. Lockwood, B., 2000. "Tax Competition and Tax Co-Ordination Under Destination and Origin Principles: A Synthesis," The Warwick Economics Research Paper Series (TWERPS) 567, University of Warwick, Department of Economics.
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Cited by:
  1. Ourania Karakosta & Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2014. "Indirect tax harmonization and global public goods," International Tax and Public Finance, Springer, vol. 21(1), pages 29-49, February.
  2. Fujiwara, Kenji, 2014. "Pareto-improving tariff-tax reforms under imperfect competition," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 12-20.
  3. Ourania Karakosta & Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2009. "Does Indirect Tax Harmonization Deliver Pareto Improvements in the Presence of Global Public Goods?," CESifo Working Paper Series 2668, CESifo Group Munich.

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